Ex-Spouse Retains ERISA Retirement Benefits
In Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, the Fifth Circuit has held that ERISA trumped a divorce decree purportedly divesting an ex-spouse of her interest in any "retirement plan, pension plan, or like benefit program existing by reason of [decedent's] employment." The decedent never removed his ex-wife as the designated beneficiary, and the decree did not meet the requirements of a "qualified domestic relations order" under ERISA. Therefore, the decree did not trigger an exception to the statute's "anti-alienation provision," which prohibits assignment or alienation of benefits provided under an employee pension benefit plan. The ex-spouse collected about $400,000 because of this mistake.
[...] D. Todd Smith of the Texas Appellate Law Blog discusses the recent 5th Circuit Court of Appeals decision in Ex-Spouse Retains ERISA Retirement Benefits. [...]
The problem of a divorced person neglecting to change his or her beneficiary designation, often for many years or even decades after a divorce, is a common bane in the administration of many retirement plans. But there is a way to help. A plans administrator could remind a participant, in a notice once a year, who he or she named as beneficiary. A notice might include an explanation that State laws and State court orders dont have any effect on who is a beneficiary under the plan. Yes, doing this costs something. Yes, its unfair that careful people should subsidize careless people. And yes, even when reminded, some participants will neglect to do anything. But if even a few participants act on the reminder, well help get benefits to the participants intended beneficiaries. And concerning those participants who dont care, a plan administrator might get some empathy in the court of popular opinion if it explains: for eight years in a row, we reminded your father that your mother was his beneficiary, and reminded him that he could make a new beneficiary designation whenever he wanted to.